1 CRISOSTOMO vs. CA
(Caravan Travel and Tours is not an entity in the
business of transporting passengers or goods, Not
a common nor a private carrier, No breach of
Contract of Carriage)
 TOUR 1: Estela L. Crisostomo contracted the services of
Caravan Travel and Tours International, Inc. (CARAVAN) to
arrange and facilitate her booking, ticketing and
accommodation in a tour dubbed "Jewels of Europe".
 The package tour cost her P74, 322.70. She was given a 5%
discount on the amount, which included airfare, and the
booking fee was also waived because petitioner’s niece,
Meriam Menor, was former’s company’s ticketing manager.
 June 12, Wed: Menor went to her aunt’s residence on a y to
deliver petitioner’s travel documents and plane tickets and
Estela paid Menor in full. Menor then told her to be at the
Ninoy Aquino International Airport (NAIA) on Saturday, two
hours before her flight on board British Airways.
 June 15, Saturday: Estela went to NAIA to take the flight for
the first leg of her journey from Manila to Hongkong.
 She learned that her plane ticket was for the flight
scheduled on June 14, 1991 (previous day). She thus
called up Menor to complain.
 TOUR 2: Subsequently, Menor prevailed upon Estela to
take another tour the "British Pageant”, which cost P20,
881.00. She gave caravan travel and tours P7, 980.00 as
partial payment and commenced the trip in July 1991.
 Upon petitioner’s return from Europe, she demanded from
respondent the reimbursement of P61, 421.70, representing
the difference between the sum she paid for "Jewels of
Europe" and the amount she owed respondent for the
"British Pageant" tour. Despite several demands,
respondent company refused to reimburse the amount,
contending that the same was non-refundable.
 Estela filed a complaint against Caravan travel and
Tours for breach of contract of carriage and damages.
 TC: The trial court held that respondent was negligent in
erroneously advising petitioner of her departure date through
its employee. But also stated that petitioner was also guilty
of contributory negligence and accordingly, deducted 10%
from the amount being claimed as refund.
 CA, on appeal: Reversed the TC decision and required
Estela to pay to the defendant-appellant the amount of
P12,901.00, representing the balance of the price of the
British Pageant Package Tour.
 MR was denied, hence this case.
 SC: Affirmed CA Decision. Estela to pay balance of the price
of the British Pageant Tour
1. Is Caravan a common carrier?
CARAVAN is not a common carrier
Petitioner contends that respondent did not
observe the standard of care required of a
common carrier when it informed her wrongly of
the flight schedule.
However, under the definition of a contract of
carriage (see below) respondent is not an entity
engaged in the business of transporting either
passengers or goods and is therefore neither a
private nor a common carrier
2. Is Caravan guilty of breach of Contract of
Carriage? NO. The company is not a common
carrier but a travel agency. It is thus not bound
under the law to observe extraordinary diligence
in the performance of its obligation, as petitioner
claims.
Contract of Carriage, definition
A contract of carriage or transportation is one
whereby a certain person or association of
persons obligate themselves to transport
persons, things, or news from one place to
another for a fixed price. Such person or
association of persons are regarded as carriers
and are classified as private or special carriers
and common or public carriers.
1
2 Philippine American General Insurance  Davao Union Marketing Corporation (DUMC) contracted the
Company v. PKS Shipping Company, G.R. No. services of PKS Shipping Company (PKS Shipping) for the
149038, April 9, 2003 shipment to Tacloban City of 75,000 bags of cement worth
P3,375,000.
 DUMC insured the goods for its full value with Philippine
American General Insurance Company (Philamgen).
 The goods were loaded aboard the dumb barge Limar
I belonging to PKS Shipping.
 December 22, 1988 9 pm: While Limar I was being towed by
PKS’ tugboat MT Iron Eagle, the barge sank a couple of
miles off the coast of Dumagasa Point, in Zamboanga del
Sur, bringing down with it the entire cargo of 75,000 bags of
cement.
 DUMC filed a formal claim with Philamgen for the full amount
of the insurance. Philamgen promptly made payment; it then
sought reimbursement from PKS Shipping of the sum paid
to DUMC but the shipping company refused to pay so
Philamgen to file suit against PKS Shipping
 RTC: dismissed the complaint - fortuitous event
 CA: Affirmed - not a common carrier but a casual occupation
Issue: W/N PKS Shipping is NOT liable since it was
NOT a common carrier
Held: NO. Petition is DENIED
Article 1732. Common carriers are persons,
corporations, firms or associations engaged in the
business of carrying or transporting passengers or
goods or both, by land, water, or air for
compensation, offering their services to the public
 Complementary is Section 13, paragraph
(b), of the Public Service Act.
 So understood, the concept of `common
carrier’ under Article 1732 may be seen to
coincide neatly with the notion of `public
service,’ under the Public Service Act
 distinction between: common or public
carrier
private or special carrier - character of the business,
such that if the undertaking is an isolated transaction,
not a part of the business or occupation, and the
carrier does not hold itself out to carry the goods for
the general public or to a limited clientele, although
involving the carriage of goods for a fee.
EX: charter party which includes both the vessel and
its crew, such as in a bareboat or demise, where the
charterer obtains the use and service of all or some
part of a ship for a period of time or a voyage or
voyages and gets the control of the vessel and its
crew.
 The regularity of its activities in this area
indicates more than just a casual activity on
its part
 The appellate court ruled, gathered from the
testimonies and sworn marine protests of
the respective vessel masters ofLimar
I and MT Iron Eagle, that there was no way
by which the barge’s or the tugboat’s crew
could have prevented the sinking of Limar I.
The vessel was suddenly tossed by waves
of extraordinary height of 6 to 8 feet and
buffeted by strong winds of 1.5 knots
resulting in the entry of water into the
barge’s hatches. The official Certificate of
Inspection of the barge issued by the
Philippine Coastguard and the Coastwise
Load Line Certificate would attest to the
seaworthiness of Limar I and should
strengthen the factual findings of the
appellate court.
2
3 FIRST PHIL INDUSTRIAL CORP v. CA  First Philippine Industrial Corp (FPIC) is a grantee of a
(FPIC, a pipeline concessionaire, is a common pipeline concession under RA 387 as amended, to contract,
carrier) install and operate oil pipelines
 Sometime in Jan 1995, FPIC applied for a mayor’s permit in
Batangas City
 Before the mayor’s permit could be issued, the City
Treasurer required FPIC to pay business tax based on gross
receipts
 FPIC paid under protest. It filed a letter-protest to the City
Treasurer stating that it is a pipeline operator granted
government concession under the Petroleum Act and is
engaged in the business of transporting petroleum products,
and therefore exempt from paying tax on gross receipts
under Sec 133 of the LGC
 City Treasurer denied protest, stating that FPIC cannot claim
exemption because it cannot be considered in transportation
business
 FPIC filed wit RTC Batangas a claim for tax refund
 City Treasurer:
o Pipelines are not included in the term “common
carrier” which refers solely to ordinary carriers such
as trucks, trains, ships and the like
o The term common carrier pertains to the mode or
manner by which a product is delivered to its
destination
 RTC: not exempt, not common carrier:
o exemption granted under Sec 133(j) of LGC
encompasses only common carriers so as not to
overburden the riding public with taxes. FPIC is not
a common carrier, but a special carrier extending
its services and facilities to a single specific or
“special customer” under a “special contract”
 CA affirmed
WN FPIC is a common carrier – YES
FPIC IS A COMMON CARRIER. Under the
Petroleum Act, a pipeline concessionaire is
considered a common carrier. RA 387 also
regards petroleum operation as a public utility.
Moreover, BIR already issued a ruling where it
declared that FPIC is a pipeline concessionaire
that is engaged only in transporting petroleum
products, it is considered a common carrier
under Republic Act No. 387
Article 1732 of the Civil Code defines a "common
carrier" as "any person, corporation, firm or
association engaged in the business of carrying or
transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services
to the public."
The test for determining whether a party is a
common carrier of goods is:
1. He must be engaged in the business of carrying
goods for others as a public employment, and must
hold himself out as ready to engage in the
transportation of goods for person generally as a
business and not as a casual occupation;
2. He must undertake to carry goods of the kind to
which his business is confined;
3. He must undertake to carry by the method by
which his business is conducted and over his
established roads; and
4. The transportation must be for hire.
Based on the above definitions and requirements,
there is no doubt that petitioner is a common
carrier. It is engaged in the business of transporting
or carrying goods, i.e. petroleum products, for hire as
a public employment. It undertakes to carry for all
persons indifferently, that is, to all persons who
choose to employ its services, and transports the
goods by land and for compensation. The fact that
petitioner has a limited clientele does not exclude it
from the definition of a common carrier.
The Civil Code makes no distinction as to the means
of transporting, as long as it is by land, water or air. It
does not provide that the transportation of the
passengers or goods should be by motor vehicle. In
fact, in the United States, oil pipe line operators are
considered common carriers.
The legislative intent in excluding from the taxing
power of the local government unit the imposition of
business tax against common carriers is to prevent a
duplication of the so-called "common carrier's tax."
3
4 Vlasons Shipping, Inc. v. Court of Appeals and
National Steel Corporation, G.R. No. L-112350,
December 12, 1997
The MV Vlasons I is a vessel which renders tramping service &
does not transport cargo/shipment for the general public. Its
services are available only to specific persons who enter into a
special contract of charter party w/ its owner, Vlasons Shipping
Inc. (VSI). The ship is a private carrier. VSI entered into a contract
of affreightment or contract of voyage charter hire w/ National
Steel Corp. (NSC) whereby NSC hired VSI’s vessel to make 1
voyage to load steel products at Iligan City & discharge them at
North Harbor, Manila, under the ff. terms:
- FIOST (Freight In & Out including Stevedoring & Trading): the
handling, loading & unloading of the cargoes are the
responsibility of the Charterer 

- Par. 10: Owners shall before & at the beginning of the voyage,
exercise 
 due diligence to make the vessel seaworthy &
properly manned, equipped & supplied to make the holds & all
other parts of the vessel in w/c cargo is carried, fit & safe for its
reception, carriage & preservation. 
 (i) W/N NSC is liable to VSI for demurrage.
- Par. 12: Owners shall not be responsible for split, chafing
and/or any damage unless caused by the negligence/default of
the master & crew.
When the vessel arrived in Manila, the 3 hatches containing the
shipment were opened by NSC’s agents, and nearly all the skids
of tinplates & hot rolled sheets were found to be wet & rusty.
There was a delay of 11 days in the unloading due to the heavy
rain. NSC called for a survey of the shipment by the Manila
Adjusters & Surveyors Company (MASCO). MASCO reported
that it found wetting & rusting of the packages of hot rolled sheets
& metal covers of the tinplates, & that the rusting was caused by
contact w/ sea water. NSC filed its complaint against VSI.
NSC’s contention: It sustained losses as a result of the act,
neglect & default of the master & crew in the management of the
vessel as well as the want of due diligence on the part of VSI to
make the vessel seaworthy & to make the holds & al other parts
of the vessel in w/c the cargo was carried, fit & safe for its
reception, carriage & preservation – all in violation of VSI’s
undertaking under their Contract of Voyage Charter Hire.
VSI’s defense: The vessel was seaworthy in all respects, & it was
not a common carrier inasmuch as she was under voyage charter
contract w/ NSC as charterer under the charter party. The vessel
encountered rough seas, strong winds, big waves & adverse
weather conditions causing the seawater to overflow on its deck.
The damage, if any, was due to the inherent defect, quality or vice
of the cargo. The stevedores of NSC who discharged the cargo
in Mania were negligent & did not exercise due care in the
discharge of the cargo.
ISSUE

(a) Whether VSI contracted w/ NSC as a common
carrier or as a private carrier.
(b) What is the extent of VSI’s responsibility & liability
over NSC’s cargo?

(c) Who has the burden of proof?

(d) W/N the vessel was seaworthy.

(e) Who were negligent: seamen or stevedores?

(f) W/N tinplates sweat.

(g) What is the effect of NSC’s failure to insure the
cargo?

(h) W/N the certificates proving seaworthiness are
admissible.

RULING

(a) PRIVATE CARRIER. VSI did not offer its services
to the general public. As found by the RTC, it carried
passengers or goods only for those it chose under a
"special contract of charter party." Thus, the rights &
obligations of VSI & NSC, including their respective
liability for damage to the cargo, are determined
primarily by stipulations in their contract of private
carriage or charter party.
(b) NSC. It is clear from the parties' Contract of
Voyage Charter Hire that VSI "shall not be
responsible for losses except on proven willful
negligence of the officers of the vessel." The
NANYOZAI Charter Party, w/c was incorporated in
the parties' contract of transportation provided that
the shipowner shall not be liable for loss of or a
damage to the cargo arising or resulting from
unseaworthiness, unless the same was caused by its
lack of due diligence to make the vessel seaworthy
or to ensure that the same was "properly manned,
equipped and supplied," & to "make the holds & all
other parts of the vessel in which cargo [was] carried,
fit & safe for its reception, carriage & preservation."
The NANYOZAI Charter Party also provided that
"owners shall not be responsible for split, chafing
and/or any damage unless caused by the negligence
or default of the master or crew."
(c) In an action against a private carrier for loss of, or
injury to, cargo, the burden is on the plaintiff to prove
4
that the carrier was negligent or unseaworthy, & the
fact that the goods were lost or damaged while in the
carrier's custody does not put the burden of proof on
the carrier. Thus, NSC must prove that the damage
to its shipment was caused by VSI's willful
negligence or failure to exercise due diligence in
making the ship seaworthy & fit for holding, carrying
& safekeeping the cargo.
Because the vessel was a private carrier, the
shipowner's obligations are governed by the
provisions of the Code of Commerce15 & not by the
NCC w/c, as a general rule, places the prima facie
presumption of negligence on a common carrier.

(d) YES. The records show that VSI exercised due

diligence to make the ship seaworthy & fit for the
carriage of NSC's cargo of steel & tinplates. This is
shown by the fact that it was drylocked & inspected
by the Philippine Coast Guard before it proceeded to
Iligan City for its voyage to Manila. The vessel's
voyage from Iligan to Manila was the vessel's first
voyage after drydocking. The Philippine Coast Guard
Station in Cebu cleared it as seaworthy, fitted and
equipped; it met all requirements for trading as cargo
vessel. The CA itself sustained the conclusion of the
RTC that the vessel was seaworthy.

(e) THE STEVEDORES WERE NEGLIGENT in

unloading the cargo from the ship. The stevedores
employed only a tent-like material to cover the
hatches when strong rains occasioned by a passing
typhoon disrupted the unloading of the cargo.
However, this tent-like covering was clearly
inadequate for keeping rain & seawater away from
the hatches of the ship. The fact that NSC actually
accepted & proceeded to remove the cargo from the
ship during unfavorable weather will not make VSI
liable for any damage caused thereby. In passing, it
may be noted that the NSC may seek
indemnification, subject to the laws on prescription,
from the stevedoring company at fault in the
discharge operations.
That due diligence was exercised by the officers &
the crew of the vessel was demonstrated by the fact
that, despite encountering rough weather twice, the
new tarpaulin did not give way & the ship's hatches
& cargo holds remained waterproof. Indeed, NSC
failed to discharge its burden to show negligence on
the part of the officers and the crew of the vessel.

5
(f) YES. The RTC relied on the testimony of Vicente
Angliongto in finding that "tinplates 'sweat' by
themselves when packed even w/o being in contact
w/ water from outside especially when the weather is
bad or raining." The CA affirmed.

(g) The obligation of NSC to insure the cargo

stipulated in the Contract of Voyage Charter Hire is
totally separate & distinct from the contractual or
statutory responsibility that may be incurred by VSI
for damage to the cargo caused by the willful
negligence of the officers & the crew of the vessel.
Clearly, NSC's failure to insure the cargo will not
affect its right, as owner & real party in interest, to file
an action against VSI for damages caused by the
latter's willful negligence. We do not find anything in
the charter party that would make the liability of VSI
for damage to the cargo contingent on or affected in
any manner by NSC's obtaining an insurance over
the cargo.

(h) Exhibit 11 is admissible under a well-settled

exception to the hearsay rule per Sec. 44 of Rule 130
of the RC, w/c provides that "entries in official records
made in the performance of a duty by a public officer
of the Philippines, or by a person in the performance
of a duty specially enjoined by law, areprima facie
evidence of the facts therein stated." Exhibit 11 is the
original certificate of the PCG issued by Lieutenant
Junior Grade Noli C. Flores to the effect that "the
vessel 'VLASONS I', a cargo vessel, is in seaworthy
condition, meets all requirements, fitted & equipped
for trading as a cargo vessel was cleared by the
PCG."
The other exhibits were inadmissible for they have
not been properly offered as evidence, or they are
photocopies, but their admission under the best
evidence rule have not been demonstrated, or they
are certificates issued by private parties, but they
have not been proven by one who saw the writing
executed, or by evidence of the genuineness of the
handwriting of the maker, or by a subscribing
witness.

(i) NO. Demurrage is the compensation provided for

in the contract of affreightment for the detention of
the vessel beyond the laytime or that period of time
agreed on for loading & unloading of cargo. It is given
to compensate the shipowner for the non-use of the
vessel. It is well-settled that Laytime runs according

6

5 Valenzuela Hardwood and Industrial Supply v.
CA, G.R. No. 102316, June 30, 1997
 On 16 January 1984, plaintiff (Valenzuela Hardwood and
Industrial Supply, Inc. – the shipper) entered into an
agreement with the defendant Seven Brothers (the Shipping
Corporation) whereby the latter undertook to load on board
its vessel M/V Seven Ambassador the former’s lauan round
logs numbering 940 at the port of Maconacon, Isabela for
shipment to Manila.
 Plaintiff (Valenzuela Hardwood) insured the logs against loss
and/or damage with defendant South Sea Surety and
Insurance Co., Inc. for P2,000,000.00 and the latter issued
its Marine Cargo Insurance Policy for P2,000,000.00.
 The said vessel M/V Seven Ambassador sank on 25 January
1984 resulting in the loss of the plaintiffs insured logs.
 A check for P5,625.00 to cover payment of the premium and
documentary stamps due on the policy was tendered due to
the insurer (South Sea Surety) but was not accepted.
Instead, the South Sea Surety and Insurance Co., Inc.
cancelled the insurance policy.
 Plaintiff demanded from South Sea Surety and Insurance
Co., Inc. the payment of the proceeds of the policy but the
latter denied liability.
 Plaintiff likewise filed a formal claim with defendant Seven
Brothers Shipping Corporation for the value of the lost logs
but the latter denied the claim.
to the particular clause of the charter party. If laytime
is expressed in "running days," this means days
when the ship would be run continuously, & holidays
are not excepted. A qualification of "weather
permitting" excepts only those days when bad
weather reasonably prevents the work contemplated.
In this case, the contract of voyage charter hire
provided for a 4-day laytime; it also qualified laytime
as WWDSHINC or weather working days Sundays &
holidays included. The running of laytime was thus
made subject to the weather, & would cease to run
in the event unfavorable weather interfered w/ the
unloading of cargo. Thus, NSC may not be held liable
for demurrage as the 4-day laytime allowed it did not
lapse, having been tolled by unfavorable weather
condition in view of the WWDSHINC qualification
agreed upon by the parties.
ISSUE: Whether defendants shipping corporation
and the surety company are liable to the plaintiff for
the latter’s lost logs.
HELD:
The charter party between the petitioner and private
respondent stipulated that the “(o)wners shall not be
responsible for loss, split, short-landing, breakages
and any kind of damages to the cargo” –VALID
There is no dispute between the parties that the
proximate cause of the sinking of M/V Seven
Ambassadors resulting in the loss of its cargo was
the “snapping of the iron chains and the subsequent
rolling of the logs to the portside due to the
negligence of the captain in stowing and securing the
logs on board the vessel and not due to fortuitous
event.” Likewise undisputed is the status of Private
Respondent Seven Brothers as a private carrier
when it contracted to transport the cargo of Petitioner
Valenzuela. Even the latter admits this in its petition.
Private respondent had acted as a private carrier in
transporting petitioner’s lauan logs. Thus, Article
1745 and other Civil Code provisions on common
carriers which were cited by petitioner may not be
applied unless expressly stipulated by the parties in
their charter party.
In a contract of private carriage, the parties may
validly stipulate that responsibility for the cargo rests
solely on the charterer, exempting the shipowner
from liability for loss of or damage to the cargo
caused even by the negligence of the ship captain.
Pursuant to Article 1306 of the Civil Code, such
stipulation is valid because it is freely entered into by
7

6 Eastern Shipping Lines, Inc. v. The Nisshin Fire
and Marine Insurance Co., and Dowa Fire &
Marine Insurance Co., Ltd.
When a carrier fails to establish any caso fortuito,
the presumption by law of fault or negligence on the
part of the carrier applies.
 The trial court rendered judgment in favor of plaintiff
Valenzuela Hardwood and against defendants Seven
Brothers and South Sea Surety. Both defendants appealed.
 Court of Appeals affirmed in part the RTC judgment by
sustaining the liability of South Sea Surety and Insurance
Company (“South Sea”), but modified it by holding that
Seven Brothers Shipping Corporation (“Seven Brothers”)
was not liable for the lost cargo.
(G.R. No. L-69044)
A vessel operated by petitioner Eastern Shipping Lines, Inc.,
loaded at Kobe, Japan for transportation to Manila, 5000 pieces
of calorized lance pipes in 28 packages consigned to Philippine
Blooming Mills Co., Inc., and 7 cases of spare parts consigned to
Central Textile Mills, Inc.; both sets of goods were insured with
Development Insurance and Surety Corp.
(G.R. No. 71478)
The same vessel took on board 128 cartons of garment fabrics
and accessories, in 2 containers, consigned to Mariveles Apparel
the parties and the same is not contrary to law,
morals, good customs, public order, or public policy.
Indeed, their contract of private carriage is not even
a contract of adhesion. We stress that in a contract
of private carriage, the parties may freely
stipulate their duties and obligations which
perforce would be binding on them. Unlike in
contract involving a common carrier, private carriage
does not involve the general public.
Hence, the stringent provisions of the Civil Code
on common carriers protecting the general
public cannot justifiably be applied to a ship
transporting commercial goods as a private
carrier. Consequently, the public policy embodied
therein is not contravened by stipulations in a charter
party that lessen or remove the protection given by
law in contracts involving common carriers.
The provisions of our Civil Code on common carriers
were taken from Anglo-American law. Under
American jurisprudence, a common carrier
undertaking to carry a special cargo or chartered to
a special person only, becomes a private carrier. As
a private carrier a stipulation exempting the owner
from liability for the negligence of its agent is not
against public policy and is deemed valid.
Such doctrine We find reasonable. The Civil Code
provisions on common carriers should not be applied
where the carrier is not acting as such but as a
private carrier. The stipulation in the charter party
absolving the owner from liability for loss due to the
negligence of its agent would be void only if the strict
public policy governing common carriers is applied.
Such policy has no force where the public at large is
not involved as in this case of a ship totally chartered
for the use of a single party. (Home Insurance Co.
vs. American Steamship Agencies Inc., 23 SCRA 24,
April 4, 1968)
ISSUES:
1. which law should govern — the Civil Code
provisions on Common carriers or the Carriage of
Goods by Sea Act?
2. whether or not the carrier is presumed to be
negligent? Yes
HELD:
The law of the country to which the goods are to be
transported governs the liability of the common
carrier in case of their loss, destruction or
deterioration. As the cargoes were transported from
Japan to the Philippines, the liability of Petitioner
8
Corporation, and two cases of surveying instruments consigned
to Aman Enterprises and General Merchandise.
The vessel caught fire and sank, resulting in the total loss of ship
and cargo
Carrier is governed primarily by the Civil Code.
However, in all matters not regulated by said Code,
the rights and obligations of common carrier shall be
governed by the Code of Commerce and by special
laws. Thus, the Carriage of Goods by Sea Act, a
special law, is suppletory to the provisions of the Civil
Code.
Article 1735 of the Civil Code provides that all cases
than those mention in Article 1734, the common
carrier shall be presumed to have been at fault or to
have acted negligently, unless it proves that it has
observed the extraordinary diligence required by law.
The burden is upon Eastern Shipping Lines to prove
that it has exercised the extraordinary diligence
required by law.
Fire –not considered a natural disaster or calamity
within the contemplation of Art. 1734 for it arises
almost invariably from some act of man or by human
means; it does not fall within the category of an act
of God unless caused by lightning or by other natural
disaster or calamity
Having failed to discharge the burden of proving that
it had exercised the extraordinary diligence required
by law, Eastern Shipping Lines cannot escape
liability for the loss of the cargo
As it was at fault, it cannot seek the protective mantle
of Sec. 4(2) of Carriage of Goods by Sea Act which
provides: “Neither the carrier nor the ship shall be
responsible for loss or damage arising or resulting
from x x x (b) Fire, unless caused by the actual fault
or privity of the carrier.”
There was actual fault of the carrier shown by lack of
diligence in that when the smoke was noticed, the fire
was already big; that the fire must have started 24
hours before the same was noticed; and that after the
cargoes were stored in the hatches, no regular
inspection was made as to their condition during the
voyage.
Extent of liability:
Article 1749. A stipulation that the common carrier's
liability is limited to the value of the goods appearing
in the bill of lading, unless the shipper or owner
declares a greater value, is binding.
G.R. No. 69044: no stipulation in the Bills of Lading
limiting the carrier’s liability for the loss or destruction
of the goods; no declaration of a higher value of the
goods; Hence, Eastern Shipping Lines’ liability
should not exceed US $500 per package (as
provided in 4(5) of the COGSA), or its peso
equivalent, at the time of payment of the value of the
9

7 SABENA BELGIAN WORLD AIRLINES V CA
G.R. No. 104685
Plaintiff Ma. Paula San Agustin, herein private respondent, was
a passenger on board Flight SN 284 of defendant airline
originating from Casablanca to Brussels, Belgium on her way
back to Manila. She checked in her luggage which contained her
valuables, namely: pieces of jewelry valued at $2,350.00; clothes
$1,500.00; shoes/bag $150; accessories $75; luggage itself
$10.00; or a total of $4,265.00, for which she was issued Tag No.
71423. She stayed overnight in Brussels and her luggage was
left on board Flight SN 284.
She arrived at Manila International Airport and immediately
submitted her Tag No. 71423 but her luggage was missing. She
was advised to accomplish and submit a property Irregularity
Report which she submitted and filed on the same day but when
her luggage could not be found, she filed a formal complaint with
defendant’s Local Manager.
Subsequently, plaintiff was furnished copies of telexes of
defendant’s Brussel’s Office that the latter found her luggage and
that they have broken the locks for identification. Plaintiff was
assured by the defendant that it has notified its Manila Office that
the luggage will be shipped to Manila. But unfortunately plaintiff
was informed that the luggage was lost for the second time.
Plaintiff demanded from the defendant the money value of the
luggage and its contents or its exchange value, but defendant
refused to settle the claim. Defendant asserts in its Answer and
its evidence tend to show that while it admits that the plaintiff was
a passenger with a piece of checked in luggage, the loss of the
luggage was due to plaintiff’s sole if not contributory negligence.
Petitioner airline company, in contending that the alleged
negligence of private respondent should be considered the
primary cause for the loss of her luggage, avers that, despite her
awareness that the flight ticket had been confirmed only for
Casablanca and Brussels, and that her flight from Brussels to
Manila had yet to be confirmed, she did not retrieve the luggage
upon arrival in Brussels. Petitioner insists that private respondent,
being a seasoned international traveler, must have likewise been
familiar with the standard provisions contained in her flight ticket
that items of value are required to be hand-carried by the
passenger and that the liability of the airline or loss, delay or
damage to baggage would be limited, in any event, to only
US$20.00 per kilo unless a higher value is declared in advance
and corresponding additional charges are paid thereon. At the
Casablanca International Airport, private respondent, in checking
goods lost, but in no case more than the amount of
damage actually sustained.
ISSUE:
Whether or not the airline is negligent? Whether
respondent’s negligence is the sole and proximate of
the loss?
RULING:
Yes airline was negligent. Fault or negligence
consists in the omission of that diligence which is
demanded by the nature of an obligation and
corresponds with the circumstances of the person, of
the time, and of the place. When the source of an
obligation is derived from a contract, the mere breach
or non-fulfillment of the prestation gives rise to the
presumption of fault on the part of the obligor. This
rule is not different in the case of common carriers in
the carriage of goods which, indeed, are bound to
observe not just the due diligence of a good father of
a family but that of “extraordinary” care in the
vigilance over the goods. The appellate court has
aptly observed:
“x x x Art. 1733 of the [Civil] Code provides that from
the very nature of their business and by reasons of
public policy, common carriers are bound to observe
extraordinary diligence in the vigilance over the
goods transported by them. This extraordinary
responsibility, according to Art. 1736, lasts from the
time the goods are unconditionally placed in the
possession of and received by the carrier until they
are delivered actually or constructively to the
consignee or person who has the right to receive
them. Art. 1737 states that the common carrier’s duty
to observe extraordinary diligence in the vigilance
over the goods transported by them ‘remains in full
force and effect even when they are temporarily
unloaded or stored in transit.’ And Art. 1735
establishes the presumption that if the goods are
lost, destroyed or deteriorated, common carriers are
presumed to have been at fault or to have acted
negligently, unless they prove that they had
observed extraordinary diligence as required in
Article 1733.
10

8 TABACALERA INSURANCE CO et al vs NORTH
FRONT SHIPPING SERVICES INC and CA
(Northfront a common carrier, In a contract of
affreightment, a common carrier is not converted
into a private carrier but remains as a common
carrier and still liable as such.)
in her luggage, evidently did not declare its contents or value,
pursuant to Section 5(c), Article IX, of the General Conditions of
Carriage, which states that: “Passengers shall not include in his
checked baggage, and the carrier may refuse to carry as checked
baggage, fragile or perishable articles, money, jewelry, precious
metals, negotiable papers, securities or other valuables.”
The trial court rendered judgment ordering Sabena Belgian World
Airlines to pay private respondent. Sabena appealed but the CA
affirmed in toto the trial court’s judgment, hence the present
petition for review.
 On 2 August 1990, 20,234 sacks of corn grains valued at
P3,500,640.00 were shipped on board North Front 777, a
vessel owned by North Front Shipping Services, Inc.
(NORTH FRONT SHIPPING) The
cargo was consigned to Republic Flour Mills Corporation in
Manila under Bill of Lading No. 001.
 The goods were insured with petitioners ( TABACALERA,
PRUDENTIAL, NEW ZEALAND) and consigned to
Republic Flour Mills Corporation.
 Upon inspection, the vessel was found fit to carry the goods
prior to loading.
 However, when the cargo was eventually unloaded there
was a shortage of 26.333 metric tons. The remaining
The above rules remain basically unchanged even
when the contract is breached by tort although
noncontradictory principles on quasi-delict may then
be assimilated as also forming part of the governing
law. Petitioner is not thus entirely off track when it has
likewise raised in its defense the tort doctrine of
proximate cause. Unfortunately for petitioner,
however, the doctrine cannot, in this particular
instance, support its case. Proximate cause is that
which, in natural and continuous sequence,
unbroken by any efficient intervening cause,
produces injury and without which the result would
not have occurred.
The above findings, which certainly cannot be said to
be without basis, foreclose whatever rights petitioner
might have had to the possible limitation of liabilities
enjoyed by international air carriers under the
Warsaw Convention .
The Warsaw Convention however denies to the
carrier availment ‘of the provisions which exclude or
limit his liability, if the damage is caused by his wilful
misconduct or by such default on his part as, in
accordance with the law of the court seized of the
case, is considered to be equivalent to wilful
misconduct,’ or ‘if the damage is (similarly) caused x
x x by any agent of the carrier acting within the scope
of his employment.’
The Convention does not thus operate as an
exclusive enumeration of the instances of an airline’s
liability, or as an absolute limit of the extent of that
liability.
(Loss of baggage twice shows gross negligence)
1. Is North Front Shipping a common carrier? YES
North Front Shipping is a common carrier
North Front Shipping Services, Inc., is a corporation
engaged in the business of transporting cargo and
offers its services indiscriminately to the public. It is
without doubt a common carrier. As such it is
required to observe extraordinary diligence in its
vigilance over the goods it transports.
The charter-party agreement between North Front
Shipping Services, Inc., and Republic Flour Mills
11
 merchandise was already moldy, rancid and
deteriorating.
 Consignee rejected the entire cargo and formally demanded
from North Front Shipping Services, Inc., payment for the
damages suffered by it. This demand went unheeded.
 Hence, the insurance companies, Petitioners, paid the
amount.
 Insurers then lodged a complaint for damages against North
Front Shipping Services, Inc., claiming that the loss was
exclusively attributable to the fault and negligence of the
carrier.
 Lower Court Dismissed the complaint for damages against
North Front, Stated that the contract entered was a
CHARTERPARTY AGREEMENT, hence only ordinary
diligence was required.
 CA: Ruled that as a common carrier required to observe a
higher degree of diligence North Front 777 satisfactorily
complied with all the requirements hence was issued a
Permit to Sail after proper inspection. Consequently, the
complaint w as dismissed and the motion for reconsideration
rejected.
 SC: Reversed CA. North Front Shipping Services, Inc., is
ordered to pay petitioners.
o In fine, we find that the carrier failed to observe the
required extraordinary diligence in the vigilance
over the goods placed in its care. The proofs
presented by North Front Shipping Services , I nc.,
were insufficient to rebut the prima facie
presumption of private respondentÊs negligence,
more so if we consider the evidence adduced by
petitioners.
Corporation did not in any way convert the common
carrier into a private carrier.
Charter Party, Definition
A charter-party is defined as a contract by which an
entire ship, or some principal part thereof, is let by
the owner to another person for a specified time or
use; a contract of affreightment by which the owner
of a ship or other vessel lets the whole or a part of
her to a merchant or other person for the conveyance
of goods, on a particular voyage, in consideration of
the payment of freight
Charter Party vs Common Carrier
The charter-party provides for the hire of the vessel
only, either for a determinate period of time or for a
single or consecutive voyage, the ship owner to
supply the ship’s store, pay for the wages of the
master of the crew, and defray the expenses for the
maintenance of the ship.
Upon the other hand, the term “common or public
carrier” is defined in Art. 1732 of the Civil Code. The
definition extends to carriers either by land, air or
water which hold themselves out as ready to engage
in carrying goods or transporting passengers or both
for compensation as a public employment and not as
a casual occupation x x x x
It is therefore imperative that a public carrier
shall remain as such, notwithstanding the
charter of the whole or portion of a vessel by one
or more persons, provided the charter is limited to
the ship only, as in the case of a time-charter or
voyage-charter (italics supplied).
2. Was Northfront negligent?
Since Northfront is a common carrier, the
following presumption holds - When goods
placed in its care are lost or damaged, the carrier
is presumed to have been at fault or to have
acted negligently.
North Front Shipping Services, Inc., therefore
has the burden of proving that it observed
extraordinary diligence in order to avoid
responsibility for the lost cargo. Laboratory
analysis revealed that the corn grains were
12

9 Sarkies Tours Philippines, Inc. v. Court of
Appeals and Dr. Elino G. Fortales, Marisol A.
Fortales and Fatima A. Fortales, G.R. No.
108897, October 2, 1997
10 COASTWISE LIGHTERAGE vs CA
(In a contract of affreightment, the common carrier
is NOT transformed into a private one)
On August 31, 1984, Fatima boarded petitioner’s bus from Manila
to Legazpi. Her belongings consisting of 3 bags were kept at the
baggage compartment of the bus, but during the stopover in
Daet, it was discovered that only one remained. The others might
have dropped along the way. Other passengers suggested
having the route traced, but the driver ignored it. Fatima
immediately told the incident to her mother, who went to
petitioner’s office in Legazpi and later in Manila. Petitioner offered
P1,000 for each bag, but she turned it down. Disapointed, she
sought help from Philtranco bus drivers and radio stations. One
of the bags was recovered. She was told by petitioner that a team
is looking for the lost luggage. After nine months of fruitless
waiting, respondents filed a case to recover the lost items, as well
as moral and exemplary damages, attorney’s fees and expenses
of litigation. The trial court ruled in favor of respondents, which
decision was affirmed with modification by the Court of Appeals,
deleting moral and exemplary damages.
 Pag-asa Sales, Inc. entered into a contract to transport
molasses from the province of Negros to Manila with
Coastwise Lighterage Corporation (Coastwise for brevity),
using the latter’s dumb barges
contaminated with salt water. North Front
Shipping Services, Inc., failed to rebut all these
arguments.
Further, It was shown during the trial that the
vessel had rusty bulkheads and the wooden
boards and tarpaulins bore heavy concentration
of molds. The tarpaulins used were not new,
contrary to the claim of North Front Shipping
Services, Inc., as there were already several
patches on them, hence, making it highly
probable for water to enter.
Issues:
Whether petitioner is liable for the loss of the
luggage. YES.
Held:
Common carriers, from the nature of their business
and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over
the goods transported by them, and this liability “lasts
from the time the goods are unconditionally placed in
the possession of, and received by the carrier for
transportation until the same are delivered, actually
or constructively, by the carrier to the person who has
a right to receive them.”
Petitioner’s receipt of Fatima’s personal luggage
have been established. Fatima brought three pieces
of luggage with her, as testified by her brother Raul,
who helped her pack her things and load them on
said bus. In its letter petitioner also tacitly admitted
its liability by apologizing to respondents and
assuring them that efforts were being made to
recover the lost items. The records also reveal that
respondents went to great lengths just to salvage
their loss.
The cause of the loss in the case at bar was
petitioner's negligence in not ensuring that the doors
of the baggage compartment of its bus were securely
fastened. As a result of this lack of care, almost all of
the luggage was lost, to the prejudice of the paying
passengers.
Whether petitioner Coastwise Lighterage was
transformed into a private carrier, by virtue of the
contract of affreightment which it entered into
with the consignee, Pag-asa Sales, Inc – NO
13
 Upon reaching Manila Bay, one of the barges, struck an
unknown sunken object. The forward buoyancy
compartment was damaged, and water gushed in through a
hole “two inches wide and twenty-two inches long.
 As a consequence, the molasses at the cargo tanks were
contaminated and rendered unfit for the use it was intended.
 This prompted the consignee, Pagasa Sales, Inc. to reject
the shipment of molasses as a total loss.
 Pag-asa Sales, Inc. filed a formal claim with the insurer of its
lost cargo, Philippine General Insurance Company (PhilGen,
for short) and against the carrier Coastwise Lighterage.
 Coastwise Lighterage denied the claim
 it was PhilGen which paid the consignee, Pag-asa Sales,
Inc., the amount of P700k representing the value of the
damaged cargo of molasses
 PhilGen then filed an action against Coastwise Lighterage
before RTC Manila seeking to recover the amount of
P700,000.00 which it paid to Pag-asa Sales, Inc
o PhilGen claims to be subrogated to all the
contractual rights and claims which the consignee
may have against the carrier, which is presumed to
have violated the contract of carriage
 RTC for PhilGen, CA affirmed
 Coastwise Lighterage stresses the fact that its contract with
Pag-asaSales, Inc is a “charter agreement.” It cites Home
Insurance Company vs. American Steamship Agencies, Inc.
wherein this Court held: “x x x a common carrier undertaking
to carry a special cargo or chartered to a special person only
becomes a private carrier.”
The SC in the cited case Home Insurance Company
vs. American Steamship Agencies, Inc. held:
“The charter party contract is one of affreightment
over the whole vessel, rather than a demise. As such,
the liability of the shipowner for acts or negligence of
its captain and crew, would remain in the absence of
stipulation.
Distinction between the two kinds of charter
parties (i.e. bareboat or demise and contract of
affreightment):
demise or bareboat charter:
 the charterer will generally be regarded as
the owner for the voyage or service
stipulated. The charterer mans the vessel
with his own people and becomes the
owner pro hac vice, subject to liability to
others for damages caused by negligence.
 To create a demise, the owner of a vessel
must completely and exclusively relinquish
possession, command and navigation
thereof to the charterer, anything short of
such a complete transfer is a contract of
affreightment (time or voyage charter party)
or not a charter party at all.
contract of affreightment:
 the owner of the vessel leases part or all of
its space to haul goods for others.
 It is a contract for special service to be
rendered by the owner of the vessel and
under such contract the general owner
retains the possession, command and
navigation of the ship, the charterer or
freighter merely having use of the space in
the vessel in return for his payment of the
charter hire
 An owner who retains possession of the
ship though the hold is the property of the
charterer, remains liable as carrier and
must answer for any breach of duty as to
the care, loading and unloading of the cargo
Although a charter party may transform a
common carrier into a private one, the same
however is not true in a contract of affreightment
Coastwise Lighterage admits that the contract it
entered into with the consignee was one of
affreightment. SC agrees: Pag-asa Sales, Inc. only
leased three of Coastwise’s vessels, in order to carry
cargo from one point to another, but the possession,
command and navigation of the vessels remained
with Coastwise Lighterage.
14

11 Macam v. CA, G.R. No. 125524, August 25, 1999  On 4 April 1989, Benito Macam, doing business under the
name and style Ben-Mac Enterprises, shipped on board the
vessel Nen Jiang, owned and operated by China Ocean
Shipping Co., through local agent Wallem Philippines
Shipping, Inc. 3,500 boxes of watermelons valued at
US$5,950.00 covered by Bill of Lading HKG 99012 and
exported through Letter of Credit HK 1031/30 issued by
National Bank of Pakistan, Hongkong and 1,611 boxes of
fresh mangoes with a value of US$14,273.46 covered by Bill
of Lading HKG 99013 and exported through Letter of Credit
HK 1032/30 also issued by Pakistan Bank. The Bills of
Lading contained the following pertinent provision: “One of
The patron of the vessel admitted that he was not
licensed.
Coastwise Lighterage cannot safely claim to have
exercised extraordinary diligence, by placing a
person whose navigational skills are questionable, at
the helm of the vessel which eventually met the
fateful accident. It may also logically, follow that a
person without license to navigate, lacks not just the
skill to do so, but also the utmost familiarity with the
usual and safe routes taken by seasoned and legally
authorized ones.
Had the patron been licensed, he could be presumed
to have both the skill and the knowledge that would
have prevented the vessel’s hitting the sunken
derelict ship that lay on their way
Whether the insurer was subrogated into the
rights of the consignee against the carrier, upon
payment by the insurer of the value of the
consignee’s goods lost while on board one of the
carrier’s vessels -YES
Article 2207 of the Civil Code is explicit on this point:
“Art. 2207. If the plaintiff’s property has been insured,
and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong
or breach of contract complained of, the insurance
company shall be subrogated to the rights of the
insured against the wrongdoer or the person who
violated the contract.”
Payment by the insurer to the assured operated as
an equitable assignment to the former of all remedies
which the latter may have against the third party
whose negligence or wrongful act caused the loss.
The right of subrogation is not dependent upon, nor
does it grow out of, any privity of contract or upon
written assignment of claim. It accrues simply upon
payment of the insurance claim by the insurer.
ISSUE 1: WON respondent is liable to petitioner for
misdelivery because GPC was not the proper
recipient
ISSUE 2: WON respondents are liable to petitioner
for releasing the goods to GPC without the bills of
lading or bank guarantee
HELD 1: NO. Respondent is not liable to petitioner
because GPC was a proper recipient. The
extraordinary responsibility of the common carriers
lasts until actual or constructive delivery of the
cargoes to the consignee or to the person who has a
right to receive them. PAKISTAN BANK was
15

12 Samar Mining v. Nordeutscher Lloyd, G.R. No.
L-28673, October 23, 1984
the Bills of Lading must be surrendered duly endorsed in
exchange for the goods or delivery order.”
 The shipment was bound for Hongkong with Pakistan Bank
as consignee and Great Prospect Company (GPC) of
Kowloon, Hongkong as notify party. On 6 April 1989, per
letter of credit requirement, copies of the bills of lading and
commercial invoices were submitted to Macam’s depository
bank, Consolidated Banking Corporation (SolidBank), which
paid Macam in advance the total value of the shipment of
US$20,223.46. Upon arrival in Hongkong, the shipment was
delivered by Wallem directly to GPC, not to Pakistan Bank,
and without the required bill of lading having been
surrendered.
 Subsequently, GPC failed to pay Pakistan Bank such that
the latter, still in possession of the original bills of lading,
refused to pay Macam through SolidBank. Since SolidBank
already pre-paid Macam the value of the shipment, it
demanded payment from respondent Wallem through 5
letters but was refused. Macam was thus allegedly
constrained to return the amount involved to SolidBank, then
demanded payment from Wallem in writing but to no avail.
 On 25 September 1991, Macam sought collection of the
value of the shipment of US$20,223.46 or its equivalent of
P546,033.42 from China Ocean Shipping and/or Wallem
before the RTC of Manila, based on delivery of the shipment
to GPC without presentation of the bills of lading and bank
guarantee. On 14 May 1993, the trial court ordered China
Ocean Shipping and Wallem to pay, jointly and severally, (1)
P546,033.42 plus legal interest from 6 April 1989 until full
payment; (2) P10,000.00 as attorney’s fees; and, (3) the
costs. The counterclaims were dismissed for lack of merit.
 The Court of Appeals appreciated the evidence in a different
manner. Thus, on 13 March 1996, the appellate court set
aside the decision of the trial court and dismissed the
complaint together with the counterclaims. On 5 July 1996
reconsideration was denied. Hence, the petition for review.
 The Supreme Court denied the petition; and affirmed the
decision of respondent Court of Appeals of 13 March 1996,
as well as its resolution of 5 July 1996 denying
reconsideration.
 The case arose from an importation made by Samar Mining
Co. Inc. of 1 crate Optima welded wedge wire sieves through
the M/S Schwabenstein, a vessel owned by Nordeutscher
Lloyd, (represented in the Philippines by its agent, C.F.
Sharp & Co., Inc.), which shipment is covered by Bill of
Lading No. 18 duly issued to consignee Samar Mining.
indicated in the bills of lading as consignee whereas
GPC was the notify party. However, in the export
invoices GPC was clearly named as buyer/importer.
Petitioner also referred to GPC as such in his
demand letter to respondent WALLEM and in his
complaint before the trial court. This premise drew
the Court to conclude that the delivery of the cargoes
to GPC as buyer/importer which, conformably with
Art. 1736 had, other than the consignee, the right to
receive the goods.
HELD 2: NO. Respondent himself admitted in his
testimony during trial that it was his practice to ask
the shipping lines to immediately release shipment of
perishable goods through telephone calls by himself
or his “people.” He no longer required presentation of
a bill of lading nor of a bank guarantee as a condition
to releasing the goods in case he was already fully
paid. Thus, taking into account that subject shipment
consisted of perishable goods and SOLIDBANK pre-
paid the full amount of the value thereof, it is not hard
to believe the claim of respondent WALLEM that
petitioner indeed requested the release of the goods
to GPC without the bills of lading.
ISSUE: Whether or not a stipulation in the bill of
lading exempting the carrier from liability for loss of
goods not in its actual custody (i.e., after their
discharge from the ship) is valid.
HELD: YES.
It is clear that in discharging the goods from the ship
at the port of Manila, and delivering the same into the
16
 Upon arrival of the vessel at the port of Manila, the
importation was unloaded and delivered in good order and
condition to the bonded warehouse of AMCYL.
 The goods were however never delivered to, nor received
by, the consignee at the port of destination — Davao.
 When the letters of complaint sent to Nordeutscher Lloyd
failed to elicit the desired response, Samar Mining filed a
formal claim for P1,691.93, the equivalent of $424.00 at the
prevailing rate of exchange at that time, against the former,
but neither paid.
 Samar Mining filed a suit to enforce payment.
 Nordeutscher Lloyd and CF Sharp & Co. brought in AMCYL
as third party defendant.
 The trial court rendered judgment in favor of Samar Mining,
ordering Nordeutscher Lloyd, et. al. to pay the amount of
P1,691.93 plus attorney’s fees and costs. However, the
Court stated that Nordeutscher Lloyd, et. al. may recoup
whatever they may pay Samar Mining by enforcing the
judgment against third party defendant AMCYL, which had
earlier been declared in default.
 Nordeutscher Lloyd and C.F. Sharp & Co. appealed from
said decision.
Notes:
The following are the pertinent ports, as provided in the bill of
lading:
Port of Loading: Bremen, Germany
Port of discharge from ship: Manila
Port of destination/Port of discharge of the goods: Davao
 As plainly indicated on the face of the bill, the vessel M/S
Schwabenstein is to transport the goods only up to Manila.
Thereafter, the goods are to be transshipped by the carrier
to the port of destination.
custody of AMCYL, the bonded warehouse,
appellants were acting in full accord with the
contractual stipulations contained in Bill of
Lading No. 18. The delivery of the goods to AMCYL
was part of appellants' duty to transship (meaning to
transfer for further transportation from one ship or
conveyance to another) the goods from Manila to
their port of destination-Davao.
The extent of appellant carrier's responsibility and/or
liability in the transshipment of the goods in question
are spelled out and delineated under Section 1,
paragraph 3 of Bill of Lading No. 18, to wit: “the
carrier shall not be liable in any capacity whatsoever
for any delay, loss or damage occurring before the
goods enter ship's tackle to be loaded or after the
goods leave ship's tackle to be discharged,
transshipped or forwarded”. Further, in Section 11 of
the same bill, it was provided that “this carrier, in
making arrangements for any transshipping or
forwarding vessels or means of transportation not
operated by this carrier shall be considered solely the
forwarding agent of the shipper and without any other
responsibility whatsoever even though the freight for
the whole transport has been collected by him…
Pending or during forwarding or transshipping the
carrier may store the goods ashore or afloat solely as
agent of the shipper…”
The Court find merits in Nordeutscher’s contention
that they are not liable for the loss of the subject
goods by claiming that they have discharged the
same in full and good condition unto the custody
of AMCYL at the port of discharge from ship —
Manila, and therefore, pursuant to the aforequoted
stipulation (Sec. 11) in the bill of lading, their
responsibility for the cargo had ceased.
The validity of stipulations in bills of lading exempting
the carrier from liability for loss or damage to the
goods when the same are not in its actual custody
has been upheld by the Court in PHOENIX
ASSURANCE CO., LTD. vs. UNITED STATES
LINES, 22 SCRA 674 (1968), ruling that “pursuant to
the terms of the Bill of Lading, appellee's
responsibility as a common carrier ceased the
moment the goods were unloaded in Manila and in
the matter of transshipment, appellee acted merely
as an agent of the shipper and consignee”
17
In the present case, by the authority of the above
pronouncements, and in conformity with the pertinent
provisions of the Civil Code, Section 11 of Bill of
Lading No. 18 and the third paragraph of Section
1 thereof are valid stipulations between the
parties insofar as they exempt the carrier from
liability for loss or damage to the goods while the
same are not in the latter's actual custody.

 Article 1736: “The extraordinary

responsibility of the common carrier lasts
from the time the goods are unconditionally
placed in the possession of, and received
by the carrier for transportation until the
same are delivered, actually or
constructively, by the carrier to the
consignee, or to the person who has a right
to receive them, without prejudice to the
provisions of article 1738.”

 Article 1738: The extraordinary liability of

the common carrier continues to be
operative even during the time the goods
are stored in a warehouse of the carrier at
the place of destination, until the consignee
has been advised of the arrival of the goods
and has had reasonable opportunity
thereafter to remove them or otherwise
dispose of them.”

Art. 1738 finds no applicability to the instant

case. The said article contemplates a situation
where the goods had already reached their place of
destination and are stored in the warehouse of the
carrier. The subject goods were still awaiting
transshipment to their port of destination, and
were stored in the warehouse of a third party
when last seen and/or heard of.

However, Article 1736 is applicable to the instant

suit. Under said article, the carrier may be relieved
of the responsibility for loss or damage to the goods
upon actual or constructive delivery of the same by
the carrier to the consignee, or to the person who has
a right to receive them. There is actual delivery in
contracts for the transport of goods when possession
has been turned over to the consignee or to his duly
authorized agent and a reasonable time is given him
to remove the goods. In the present case, there

18

13 Servando v. Philippine Steam Navigation Co.  Philippine Steam Navigation has a vessel that sails from
(1982) Manila to Negros Occidental. In one trip, the appellees Clara
Uy Bioco and Amparo Servando around 1,500 cavans of rice
Doctrine: and 44 cartons of colored paper respectively.
In cases of force majeure, a common carrier is free  The cargo successfully reached Negros Occidental and was
from any responsibility. discharged, in good and complete order, from the ship and
thereafter stored in the Bureau of Customs warehouse in the
port. On the very same day, a fire of unknown origin razed
the Customs warehouse, also damaging the goods of Uy
Bioco and Servando.
 These two sued Philippine Steam Navigation for the cost of
the goods, contending that the common carrier is required to
exercise extraordinary diligence until the goods have been
delivered to them, and discharge to the Customs warehouse
was not yet actual or constructive delivery to them.
was actual delivery to the consignee through its
duly authorized agent, the carrier.
Lastly, two undertakings are embodied in the bill of
lading: the transport of goods from Germany to
Manila, and the transshipment of the same goods
from Manila to Davao, with Samar Mining acting as
the agent of the consignee. The moment the subject
goods are discharged in Manila, Samar Mining’s
personality changes from that of carrier to that of
agent of the consignee. Such being the case, there
was, in effect, actual delivery of the goods from
appellant as carrier to the same appellant as agent
of the consignee. Upon such delivery, the appellant,
as erstwhile carrier, ceases to be responsible for any
loss or damage that may befall the goods from that
point onwards. This is the full import of Article 1736.
But even as agent of the consignee, the appellant
cannot be made answerable for the value of the
missing goods. It is true that the transshipment of the
goods, which was the object of the agency, was not
fully performed. However, appellant had commenced
said performance, the completion of which was
aborted by circumstances beyond its control. An
agent who carries out the orders and instructions of
the principal without being guilty of negligence,
deceit or fraud, cannot be held responsible for the
failure of the principal to accomplish the object of the
agency.
Issue:
W/N the common carrier Philippine Steam is liable
Held/Ratio:
No. The fire was a fortuitous event. Where fortuitous
event or force majeure is the immediate and
proximate cause of the loss, the obligor is exempt
from liability for non-performance.
In a legal sense and, consequently, also in relation to
contracts, a ‘caso fortuito’ presents the following
essential characteristics: (1) the cause of the
unforeseen and unexpected occurrence, or of the
failure of the debtor to comply with his obligation,
must be independent of the human will; (2) it must be
impossible to foresee the event which constitutes the
‘caso fortuito’, or if it can be foreseen, it must be
impossible to avoid; (3) the occurrence must be such
as to render it impossible for the debtor to fulfill his
19

14 MAERSK LINE vs. CA  Petitioner Maersk Line is engaged in the transportation of
G.R. No. 94761 goods by sea, doing business in the Philippines through its
general agent, Compania de Tabacos de Filipinas, while
private respondent Efren Castillo is the proprietor of Ethegal
Laboratories, a firm engaged in the manufacture of
pharmaceutical products.
 On Nov. 12, 1976, Castillo ordered from Eli Lilly, Inc. of
Puerto Rico 600,000 empty gelatin capsules for the
manufacture of his pharmaceutical products. The capsules
were placed in 6 drums of 100,000 capsules each valued at
US$1,668.71. Shipper Eli Lilly,Inc. advised Castillo through
a Memorandum of Shipment that the products were already
shipped on board MV “Anders Maerskline” for shipment to
the Philippines via Oakland, California. In said
Memorandum, shipper Eli Lilly, Inc. specified the date of
arrival to be April 3, 1977.
 However, for unknown reasons, said cargoes of capsules
were mis-shipped and diverted to Richmond, Virginia, USA
and then transported back to Oakland, California, USA and
with the goods finally arriving in the Philippines on June 10,
1977 or after two (2) months from the date specified in the
memorandum. Consignee Castillo refused to take delivery of
the goods on account of its failure to arrive on time, and filed
an action for rescission of contract with damages against
Maersk Line and Eli Lilly alleging gross negligence and
undue delay.
 Denying that it committed breach of contract, petitioner
alleged in its answer that the subject shipment was
transported in accordance with the provisions of the NCC
covering bill of lading and that its liability under the law on
transportation of good attaches only in case of loss,
destruction or deterioration of the goods as provided for in
Article 1734 of Civil Code. For its part, Eli Lilly in its cross
obligation in a normal manner; and (4) the obligor
must be free from any participation in the aggravation
of the injury resulting to the creditor.
In the case at bar, the burning of the customs
warehouse was an extraordinary event which
happened independently of the will of the appellant.
The latter could not have foreseen the event.
There is nothing in the record to show that appellant
carrier incurred in delay in the performance of its
obligation.
ISSUE: Whether Maersk Line is liable for damages
resulting from delay in the delivery of the shipment in
the absence in the bill of lading of a stipulation on the
period of delivery.
RULING:
Petitioner's insitence that it cannot be held liable for
the delay finds no merit. Petitioner maintains that it
cannot be held for damages for the alleged delay in
the delivery of the 600,000 empty gelatin capsules
since it acted in good faith and there was no special
contract under which the carrier undertook to deliver
the shipment on or before a specific date.
The bill of lading covering the subject shipment
among others, reads:
6. GENERAL
(1) The Carrier does not undertake that the goods
shall arrive at the port of discharge or the place of
delivery at any particular time or to meet any
particular market or use and save as is provided in
clause 4 the Carrier shall in no circumstances be
liable for any direct, indirect or consequential loss or
damage caused by delay. If the Carrier should
nevertheless be held legally liable for any such direct
or indirect or consequential loss or damage caused
by delay, such liability shall in no event exceed the
freight paid for the transport covered by this Bill of
Lading.
It is not disputed that the aforequoted provision at the
back of the bill of lading, in fine print, is a contract of
adhesion. Generally, contracts of adhesion are
considered void since almost all the provisions of
these types of contracts are prepared and drafted
only by one party, usually the carrier. The only
20
 claim argued that the delay was due solely to the negligence
of Maersk Line.
 The Trial Court dismissed the complaint against Eli Lilly and
the latter withdrew cross claim but TC still held Maersk liable
and CA affirmed with modifications.
participation left of the other party in such a contract
is the affixing of his signature thereto, hence the term
"Adhesion".
Nonetheless, settled is the rule that bills of lading are
contracts not entirely prohibited. One who adheres to
the contract is in reality free to reject it in its entirety;
if he adheres, he gives his consent (Magellan
Manufacturing Marketing Corporation v. Court of
Appeals, et al., 201 SCRA 102 [1991]).
However, the aforequoted ruling applies only if such
contracts will not create an absurd situation as in the
case at bar. The questioned provision in the subject
bill of lading has the effect of practically leaving the
date of arrival of the subject shipment on the sole
determination and will of the carrier.
While it is true that common carriers are not obligated
by law to carry and to deliver merchandise, and
persons are not vested with the right to prompt
delivery, unless such common carriers previously
assume the obligation to deliver at a given date or
time, delivery of shipment or cargo should at least be
made within a reasonable time.
In Saludo, Jr. v. Court of Appeals (207 SCRA 498
[1992]) this Court held:
The oft-repeated rule regarding a carrier's liability for
delay is that in the absence of a special contract, a
carrier is not an insurer against delay in
transportation of goods. When a common carrier
undertakes to convey goods, the law implies a
contract that they shall be delivered at destination
within a reasonable time, in the absence, of any
agreement as to the time of delivery. But where a
carrier has made an express contract to transport
and deliver properly within a specified time, it is
bound to fulfill its contract and is liable for any delay,
no matter from what cause it may have arisen. This
result logically follows from the well-settled rule that
where the law creates a duty or charge, and the
default in himself, and has no remedy over, then his
own contract creates a duty or charge upon himself,
he is bound to make it good notwithstanding any
accident or delay by inevitable necessity because he
might have provided against it by contract. Whether
or not there has been such an undertaking on the
part of the carrier is to be determined from the
21

15 GANZON vs CA  On 28 November 1956, Gelacio Tumambing (TUMAMBING)
contracted the services of Mauro B. Ganzon to haul 305
(Ganzon Common Carrier - Liable, Dissent by J. tons of scrap iron from Mariveles, Bataan, to the port of
Melencio Herrera: not liable under exception under Manila on board the lighter LCT “Batman.”
Art 1734 (5))  Pursuant to this agreement, Mauro B. Ganzon sent his
lighter “Batman” to Mariveles where it docked in 3 feet of
water.
 On 1 December 1956, Tumambing delivered the scrap iron
to Filomeno Niza, captain of the lighter, for loading which
was actually begun on the same date by the crew of the
lighter under the captain’s supervision.
ALLEGED ACTS OF INTERVENTION
1. Mayor Advincula: When about half of the scrap iron was
already loaded, Mayor Jose Advincula of Mariveles,
Bataan, arrived and demanded P5,000.00 from
Tumambing. The latter resisted the shakedown and
after a heated argument between them, Mayor Jose
Advincula drew his gun and fired at Tumambing. The
gunshot was not fatal but Tumambing had to be taken
to a hospital in Balanga, Bataan, for treatment. After
sometime, the loading of the scrap iron was resumed.
2. Acting Mayor Rub: But on 4 December 1956, Acting
Mayor Basilio Rub, accompanied by 3 policemen,
ordered captain Filomeno Niza and his crew to dump the
circumstances surrounding the case and by
application of the ordinary rules for the interpretation
of contracts.
An examination of the subject bill of lading shows that
the subject shipment was estimated to arrive in
Manila on April 3, 1977. While there was no special
contract entered into by the parties indicating the
date of arrival of the subject shipment, petitioner
nevertheless, was very well aware of the specific
date when the goods were expected to arrive as
indicated in the bill of lading itself. In this regard,
there arises no need to execute another contract for
the purpose as it would be a mere superfluity.
In the case before us, we find that a delay in the
delivery of the goods spanning a period of two (2)
months and seven (7) days falls was beyond the
realm of reasonableness. Described as gelatin
capsules for use in pharmaceutical products, subject
shipment was delivered to, and left in, the
possession and custody of petitioner-carrier for
transport to Manila via Oakland, California. But
through petitioner's negligence was mishipped to
Richmond, Virginia.
1. Is Ganzon liable to Tumambing for the lost
scrap iron? YES, presumed to be at fault.
Ganzon a common carrier – did not prove he
exercised extraordinary diligence. Further, SC
states that the loss was not proven to be due to
any of the causes in Article 1734 – not caso
fortuito – no authority of the mayor to issue an
order was given in evidence.
Ganzon states loss was mainly due to the
intervention of the officials
Petitioner maintains that he is exempt from any
liability because the loss of the scraps was due
mainly to the intervention of the municipal
officials of Mariveles which constitutes a caso
fortuito as defined in Article 1174 of the Civil
Code.

CA/ SC: The appellee failed to establish this.
Indeed, no authority or power of the acting
mayor to issue such an order was given in
evidence. Neither has it been shown that the
22

16 Everett Steamship Corp. v. Court of Appeals,
G.R. No. 122494, October 08, 1998
scrap iron where the lighter was docked. The rest was
brought to the compound of NASSCO.
Later on Acting Mayor Rub issued a receipt stating that the
Municipality of Mariveles had taken custody of the scrap iron.
 Tumambing instituted in the CFI of Manila an action
against Ganzon for damages based on culpa
contractual.
 TRIAL COURT: The trial court rendered a decision absolving
Ganzon from liability.
 CA: On appeal, however, the appellate court reversed and
set aside the decision appealed from, and entered a new one
ordering Ganzon to pay Tumambing.
Hence, the petition for review on certiorari.
SC: The Supreme Court denied the petition, and affirmed the
assailed decision of the Court of Appeals; with costs against
Ganzon; the decision being immediately executory.
Melencio – Herrera ,J. Dissenting:
Ganzon not liable.
Petitioner can not be held liable for damages for the loss and
destruction of the scrap iron. The loss of said cargo was due to
an excepted cause - an „order or act of competent public
authority‰ (Article 1734[5], Civil Code).
 Loading of iron suspended because of Mayor
Advinculas intevention
 When loading was resumed, acting Mayor Rub, ordered
the dumping of the iron in the sea.
 Through the “order or act of competent public authority”
therefore, the performance of a contractual obligation
was rendered impossible. The scrap iron that was
dumped into the sea was “destroyed” while the rest of
the cargo was “seized”
Private respondent imported 3 crates of bus spare parts marked
as MARCO C/No. 12, MARCO C/No. 13 and MARCO C/No. 14,
from its supplier, Maruman Trading Company, Ltd. (Maruman
Trading), a foreign corporation based in Inazawa, Aichi, Japan.
The crates were shipped from Nagoya, Japan to Manila on board
cargo of scrap iron belonged to the Municipality
of Mariveles.
Contract of Carriage was perfected
The petitioner, thru his employees, actually
received the scraps is freely admitted.
By the said act of delivery, the scraps were
unconditionally placed in the possession and
control of the common carrier, and upon their
receipt by the carrier for transportation, the
contract of carriage was deemed perfected.
Extraordinary responsibility ceases only
upon delivery by the carrier to the
consignee
The fact that part of the shipment had not been
loaded on board the lighter did not impair the
said contract of transportation as the goods
remained in the custody and control of the
carrier, albeit still unloaded.
Ganzon failed to show loss was due to
causes enumerated in 1734
The petitioner has failed to show that the loss
of the scraps was due to any of the following
causes enumerated in Article 1734 of the Civil
Code :
(1) Flood, storm, earthquake, lightning, or other
natural disaster or calamity;
(2) Act of the public enemy in war, whether
international or civil;
(3) Act or omission of the shipper or owner of
the goods;
(4) The character of the goods or defects in the
packing or in the containers;

(5) Order or act of competent public
authority. (SEE DISSENT)
Issues:
1. Is the petitioner liable for the actual value
and not the maximum value recoverable
under the bill of lading?
23
"ADELFAEVERETTE," a vessel owned by petitioner's principal,
Everett Orient Lines. Upon arrival at the port of Manila, it was
discovered that the crate marked MARCO C/No. 14 was
missing. Private respondent claim upon petitioner for the value of
the lost cargo amounting to One Million Five Hundred Fifty Two
Thousand Five Hundred (Y1, 552,500.00) Yen, the amount
shown in an Invoice No. MTM-941, dated November 14, 1991.
However, petitioner offered to pay only One Hundred Thousand
(Y100,000.00) Yen, the maximum amount stipulated under
Clause 18 of the covering bill of lading which limits the liability of
petitioner. Private respondent rejected the offer and thereafter
instituted a suit for collection. The trial court rendered a decision
in favour of the private respondents and this was affirmed by the
Court of Appeals. Thus, this instant petition.
2. Is private respondent, as consignee, who
is not a signatory to the bill of lading bound
by the stipulations thereof?
Held:
1. The Petitioner is only liable for the
maximum value recoverable under the bill
of lading.
Clause 18 of the covering bill of lading:
18. All claims for which the carrier may be liable
shall be adjusted and settled on the basis of the
shipper's net invoice cost plus freight and insurance
premiums, if paid, and in no event shall the carrier
be liable for any loss of possible profits or any
consequential loss.
The carrier shall not be liable for any loss of or any
damage to or in any connection with, goods in an
amount exceeding One Hundred thousand Yen in
Japanese Currency (Y100,000.00) or its equivalent
in any other currency per package or customary
freight unit (whichever is least) unless the value of
the goods higher than this amount is declared in
writing by the shipper before receipt of the goods by
the carrier and inserted in the Bill of Lading and
extra freight is paid as required. (Emphasis
supplied)
Pertinent provisions that is applicable as to this
case:
Art. 1749. A stipulation that the common carrier's
liability is limited to the value of the goods
appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be
recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if
it is reasonable and just under the circumstances,
and has been freely and fairly agreed upon.
Pursuant to the afore-quoted provisions of law, it is
required that the stipulation limiting the common
carrier's liability for loss must be "reasonable and
just under the circumstances, and has been freely
and fairly agreed upon."
The above stipulations are reasonable and just. In
the bill of lading, the carrier made it clear that its
liability would only be up to One Hundred Thousand
(Y100,000.00) Yen. However, the shipper,
Maruman Trading, had the option to declare a
higher valuation if the value of its cargo was higher
than the limited liability of the carrier. Considering
24

17 SUMMA INSURANCE CORP vs CA  A vessel owned by the National Galleon Shipping Corp
(Arrastre operator liable for loss of shipment in its (NGSC) arrived at a pier in Manila, carrying a shipment
custody. Extent of liability is provided by the consigned to the order of Caterpillar Far East Ltd. with
management contract.) Semirara Coal Corp as “notify party”
 The shipment, including a bundle of PC8U blades, was
covered by marine insurance
 The shipment was discharged from the vessel to the custody
of Metro Port Service, Inc., the exclusive arrastre operator at
the South Harbor.
 Three good-order cargo receipts were issued by NGSC
 The forwarder, Sterling International Brokerage Corporation,
withdrew the shipment from the pier and loaded it on the
barge “Semirara 8104”
 The barge arrived at its port
 When Semirara inspected the shipment at its warehouse, it
discovered that the bundle of PC8U blade was missing
 Metro Port issued a shortlanded certificate stating that the
said bundle was already missing when it received the
shipment from the NGSC vessel
 Semirara filed with Summa Insurance and NGSC its claim
for the alleged value of the lost bundle
 Summa Insurance paid Semirara
 Semirara executed a release of claim and subrogation
receipt
 Summa Insurance filed claim with NGSC and Metro Port, but
it was unsuccessful
 Summa insurance filed complaint for collection of sum of
money with RTC Manila
 RTC absolved NGSC from any liability, but found Metro Port
liable
o In resolving the issue as to who had custody of the
shipment when it was lost, the trial court relied more
on the good-order cargo receipts issued by NGSC
than on the short-landed certificate issued by
private respondent
 CA modified, reduced Metro Port’s liability to merely P3500
(from approx. P281k)
that the shipper did not declare a higher valuation, it
had itself to blame for not complying with the
stipulations.
2. Private Respondents are still bound by the
stipulations of the bill of lading
In Sea-Land Service, Inc. vs. Intermediate Appellate
Court (supra), it was held that even if the consignee
was not a signatory to the contract of carriage
between the shipper and the carrier, the consignee
can still be bound by the contract.
Is an arrastre operator legally liable for the loss
of a shipment in its custody? – YES
 The relationship between the consignee and the
arrastre operator is much akin to that existing
between the consignee or owner of shipped
goods and the common carrier, or that between
a depositor and a warehouseman.
 In the performance of its obligations, an arrastre
operator should observe the same degree of
diligence as that required of a common carrier
and a warehouseman as enunciated under
Article 1733 of the Civil Code and Section 3(b)
of the Warehouse Receipts Law, respectively.
 Being the custodian of the goods discharged
from a vessel, an arrastre operator’s duty is to
take good care of the goods and to turn them
over to the party entitled to their possession.
If so, what is the extent of its liability? – MGT
CONTRACT
 An arrastre operator is bound by the
management contract it had executed
with the Bureau of Customs.
 However, a management contract, which is
a sort of a stipulation pour autrui within the
meaning of Article 1311 of the Civil Code, is
also binding on a consignee because it is
incorporated in the gate pass and delivery
receipt which must be presented by the
consignee before delivery can be effected
to it.
 The insurer, as successor-in-interest of
the consignee, is likewise bound by the
management contract.
 Indeed, upon taking delivery of the cargo, a
consignee (and necessarily its successor-
in- interest) tacitly accepts the provisions of
the management contract, including those
25
 which are intended to limit the liability of one
of the contracting parties, the arrastre
operator.
 However, a consignee who does not avail
of the services of the arrastre operator is not
bound by the management contract. Such
an exception to the rule does not obtain
here as the consignee did in fact accept
delivery of the cargo from the arrastre
operator.
NOTE: This petition was dismissed. The P3500
liability stands because the Management Contract
provides the following
“…the CONTRACTOR shall be solely responsible as
an independent CONTRACTOR, and hereby agrees
to accept liability and to promptly pay to the
steamship company, consignee, consignor or other
interested party or parties for the loss, damage, or
nondelivery of cargoes to the extent of the actual
invoice value of each package which in no case shall
be more than Three Thousand Five Hundred Pesos
(P3,500.00) for each package unless the value of the
importation is otherwise specified or manifested or
communicated in writing together with the invoice
value and supported by a certified packing list to the
CONTRACTOR by the interested party or parties
before the discharge of the goods
Summa insurance failed to convince SC that the
requirement of the management contract had been
complied with to entitle it to recover the actual invoice
value of the lost shipment

26